The national bank regulator on Friday issued an updated guidance bulletin on “venture loans” to “reflect the OCC’s policy of not discouraging banks from engaging in prudent venture lending activities.”
Bulletin 2025-45, “Commercial Lending: Venture Loans to Companies in an Early, Expansion, or Late Stage of Corporate Development,” from the Office of the Comptroller of the Currency (OCC) was issued as the agency rescinded Bulletin 2023-34 of the same title. The guidance “applies to commercial loans to companies in an early, expansion, or late stage of corporate development,” the agency said.
In Friday’s bulletin, the OCC said a bank’s board and management is responsible for ensuring that venture loans “are consistent with the bank’s risk appetite, maintained within established risk limits, appropriately documented and underwritten, accurately risk-rated, and sufficiently reserved.” It cautions, however, that “(g)iven the heightened uncertainty and higher probability of failure associated with new business ventures, venture loans tend to have a higher risk of default than other commercial loans, which should be reflected in banks’ risk management practices.”
There are changes from the previous bulletin. Just a couple small examples: it omits a previous statement regarding a bank’s determination of whether a borrower is “creditworthy; and it includes no mention of the role of examiners in scrutinizing loan commitments or addressing how weak venture loan underwriting might affect a bank’s calculation of loan loss reserves.
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